U.S. energy producer Delta Petroleum Corp. (DPTR) has entered into an agreement with Denver-based Opon International LLC to sell a stake in some of its natural gas fields in Colorado for $400 million. Delta has also granted a 60-day exclusive period to Opon to arrange financing for the transaction, which is expected to close by Jun 1, 2010.
As per the non-binding letter of intent signed between the companies, Delta plans to offload a 37.5% non-operated working interest in its Vega Area assets in western Colorado’s Piceance Basin to Opon. Upon closure of the proposed deal, Delta has agreed to issue 5.7 million shares to Opon at $3.50 each and warrants to purchase another 13.3 million shares at $1.50 each. Delta will still continue to operate the Vega project subject to a joint venture agreement with Opon.
Of the total sale proceeds, Delta has set aside $225 million to develop its Vega Area gas assets over the next three years, while the remaining amount will go towards strengthening the company’s balance sheet and fulfilling general working capital purposes.
The deal comes as a huge boost for Delta, which late last year said that it was considering a possible sale of the company, among other moves. Further, Delta will be able to mobilize funds to revive drilling in the area, which had been severely limited by the tight credit market. Lenders restricted the company’s drilling budget to just $10 million in the current quarter and $5 million in the second quarter as gas prices fell.
Following the stake sale announcement, shares of Delta Petroleum soared 41 cents, or 30.2%, to close at $1.77. Earlier in the day, the shares rallied to $1.95, the highest price since last Sep.
Delta Petroleum is an independent energy firm engaged in the exploration and production of oil and gas properties. The company’s operations are focused on the Rocky Mountain and Gulf Coast regions.
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